Brewing Rivalries: The Coffee Wars Heat Up!
NYT: From Starbucks to up-and-comers like Scooter’s Coffee, a fierce competition is brewing to create the most outrageous, calorie-packed, barely-coffee drink.
Here’s what’s happening ⬇
☕ Six years ago in Odessa, a West Texas oil town, there were around 17 coffee shops. Today, that number has skyrocketed to about 55. Starbucks alone has eight locations, with a ninth on the way by the end of the year. Regional Arkansas brand 7 Brew Coffee has launched three drive-thru spots offering Funnel Cake Macchiatos, Pixie Stick energy drinks, and wild berry smoothies. Oregon-based Dutch Bros and The Human Bean have also set up shop, joining the surge of new cafes that have opened in recent years.
☕ In Texas, towns the size of Odessa are experiencing a similar trend — what Odessa’s mayor refers to as the three Cs: Carwashes, Chicken joints, and Coffee shops. This phenomenon isn’t limited to Texas. Nationwide, coffee shops and cafes focused on tea and coffee drinks are among the fastest-growing sectors in the restaurant industry.
☕ It’s not just giants like Starbucks and Dunkin’ catering to coffee lovers — many other brands are eyeing expansion into regions like the Midwest and South, where they see untapped potential. Seven years ago, 7 Brew started with a single kiosk in Rogers, Arkansas, and now boasts over 190 locations stretching from Casper, Wyoming, to upstate New York. Similarly, Nebraska-based Scooter’s Coffee has grown from 170 stores in 2018 to an anticipated 770 by the end of this year, according to market data from Datassential. Christine Baron, CEO of Dutch Bros. (#BROS), notes: “We had 370 stores in 2019 and now we’re at 912.” She added, “We’re aiming to surpass 4,000 stores in the next 10 to 15 years.”
☕ What’s intriguing is how difficult it can be to find a simple cup of coffee in many of the new cafes. There’s a bit of an arms race happening in the coffee industry with more and more places competing to outdo each other with sweet, elaborate, flavored creations that often barely resemble what most people would recognize as “coffee.” Instead, much of the sales growth is driven by iced drinks-whether they’re syrupy, frothy, cookie-flavored, fruity, or packed with caffeine.
☕ One of the challenges ahead for Brian Niccol, the new CEO of Starbucks, who was unexpectedly lured away from Chipotle in August with a substantial pay package (reportedly over $100 million), is reshaping the brand’s landscape. He steps into the role after Laxman Narasimhan, who was abruptly ousted after just 16 months on the job. Starbucks is striving to regain its former vibe. However, amid concerns about declining foot traffic and revenue that suggest some coffee drinkers might be cutting back, Starbucks and other traditional chains are facing intense competition — not only from each other but also from fast-food outlets vying for prime real estate in cities nationwide. In the post-Covid era, coffee shops, burger joints, and taco spots are all competing for the same drive-thru locations. This raises the question: Just how much coffee does a city or neighborhood really need?
☕ Many coffee shops are focusing on the Starbucks model, yet they aim to distinguish themselves — and from each other — by offering different drinks, primarily iced, that don’t taste like traditional coffee. While Starbucks might not be worried about this competition, it’s definitely paying attention: this summer, it introduced iced options like the Melon Burst Iced Energy drink. However, it could take years or even decades for a true rival to emerge that can challenge Starbucks’ dominance. Moreover, the most coveted commercial real estate in many cities right now is the “end cap” — prime spots at the corners of malls or strip malls ideal for cafes and walkways. But Starbucks’ immense scale gives it access to cheaper capital, allowing it to easily cover real estate costs, a significant advantage over smaller competitors.